By law, you must provide a written contract for residential building work:

• If the contract price is over $1,000 (including GST), or
• if the contract price is not known, is for the provision of labour and materials by the contractor the reasonable market cost of which is more than $1,000 (including GST).

Jobs worth between $1,001 and $5,000 require a written 'small job' contract with minimum basic information, while building jobs worth more than $5,000 must be covered by more extensive written contracts.

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Residential building work worth between $1,001 and $5,000 must be covered by a 'small jobs' contract which includes the following minimum information:

• the date of the contract
• names and signatures of both parties
• the contractor's licence number
• a brief description of the work, and
• the price (if known).

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Residential building work worth more than $5,000 requires a more extensive home building contract. These contracts must contain:

• the date and signatures of both the contractor and home owner
• the home owner’s name and the exact name on your contractor’s licence and licence number
• a sufficient description of the work to be carried out
• attached plans and specifications
• relevant warranties required by the Home Building Act 1989
• the contract price, which must be prominently displayed on the first page and a warning with an explanation if the contract price is not known or subject to change
• a clause that states that any agreement to vary the contract or any plans and specifications to be done under the contract (including variations):
  i) are taken to form part of the contract
  ii) must be in writing and signed by both the home owner and contractor.
• a check list of 12 items
• a caution about signing the contract if the home owner cannot answer yes to all items in the check list
• a note about the home owner’s entitlement to a copy of the signed contract within five days of signing
• a note about the contractor's obligation to give a certificate of home warranty insurance if the contract value is over $20,000 (or $12,000 if the contract was entered into before 1 January 2012)
• a clear statement setting out the cooling-off period of five clear business days within which the home owner may cancel the contract, applicable to contracts valued at over $20,000 (or $12,000 if the contract was entered into before 1 February 2012)
• If the work exceeds $5,000, the contractor must provide the home owner with a copy of the Consumer building guide. The Guide can be downloaded for free by contractors from the Consumer building guide web page and is updated to reflect any changes to laws or polices about home building.
• The home owner must provide a statement of acknowledgement that they have:
  i) read and understood the Consumer building guide which explains procedures for the resolution of contract and insurance disputes
  ii) completed the checklist and answered yes to all items on it.
• a 'work compliance clause' that states the work will comply with
  i) the Building Code of Australia, to the extent required under the Environmental Planning and Assessment Act 1979
  ii) all other relevant codes, standards and specifications that the work is required to comply with under any law
  iii) the conditions of any relevant development consent or complying development certificate.
• a clause that states that the contract may limit the liability of the contractor for failure to comply with the above work compliance clause if the failure relates solely to:
  i) a design or specification prepared by or on behalf of the home owner or
  ii) a design or specification required by the home owner if the contractor has advised the home owner in writing that they go against the 'work compliance clause'.

Deposit

You cannot request a deposit of more than:

• 5% where the contract price exceeds $20,000, or
• 10% when the contract price is $20,000 or less.

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The off-the-plan contract for sale must include terms that:

• inform the buyer that the developer selling the property does not need not give a certificate of home warranty insurance if the building work has not yet started
• inform the buyer that the law requires there to be home warranty insurance on the building work (unless it is a construction of a multi-storey building)
• require the developer to give to the purchaser the certificate of home warranty insurance within 14 days after the insurance was taken out
• enable the purchaser to cancel the contract for sale if the home warranty insurance certificate is not provided within 14 days after being available.

The developer/builder who sells residential property off-the-plan does not need to attach a certificate of home warranty insurance to the contract for sale, as long as the work contracted with the builder has not yet commenced.

Cancellations

The legal right of cancelling a contract under the Home Building Act 1989 is limited to situations without home warranty insurance at the arranged time. In this situation, the prospective purchaser can only cancel before the contract has been completed (ie before settlement).

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For all types and sizes of residential building work, Fair Trading home building contracts can be used. There are two contracts available, downloadable for FREE in PDF format.

• Home building contract for work between $1,001 and $5,000 (size: 357 kb)  
  Suitable for trade work, maintenance and repair work as well as smaller alterations or improvements likely to cost less than $5,000.
  
• Home building contract for work over $5,000 (size: 715 kb) 
  Suitable for new homes, major alterations and additions.

Alternatively, as a builder or tradesperson, you may wish to use your own contract or one purchased from an industry association. This is fine as long as you understand each clause and that the contract contains all of the items listed above as well as the contract checklist for owners entering a building contract.

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